The bank followed up a series of upbeat forecasts on crop
prices, from the likes of Newedge and Macquarie, by foreseeing a return in corn
prices to $6 a bushel, and soybean prices below $14 a bushel, within a year.

While SocGen's fresh estimates represented upgrades from its
previous forecasts, they implied discounts of up to 20% on levels Chicago futures
are currently pricing in.

Indeed, the bank recommended that commodity investors go
underweight in agriculture and livestock futures, while giving extra impetus to
bets on base and precious metals.

It also recommended a trade of shorting Chicago corn, hedged
against a long position in wheat, in which it remained – relatively – upbeat,
forecasting a boost to values from the depletion of Black Sea export supplies
and from detrimental dryness as US farmers begin sowing winter grains.

'Bearish outlook'

SocGen analyst Christopher Narayanan said that, on corn, a
position of being "bearish to the current forward curve" reflected concern at
the extent of demand cuts that already seem to be occurring to match consumption
to drought-depleted US supplies.

Margins for ethanol producers were "muted", just as the US summer
driving season, the period of peak demand, is ending, while America's corn exports
"continue to fall".

Official data on Monday showed US weekly corn exports for
the week to September 6, the first period for the 2012-13 marketing year, at
9.76m bushels, well below the 25m bushels a week needed to meet the US Department
of Agriculture forecast of 1.3bn bushels for the whole season.

Mr Narayanan also saw "significant rationing" in US feed
demand, with chicken and hog producers cutting back in the face of negative
margins prompted by high feed prices, and cattle ranchers stepping up slaughter
of heifers, potential breeding animals.

"This not only will eventually decrease the supply of live
cattle available to market in the medium term, but also decrease the amount of
feed needed in the second half of the 2012-13 marketing year."

Buyers dig in their
heels

For soybeans, he flagged a poor performance in prices which
appeared more than might be expected alone from harvest pressure, when a spike
in new supplies temporarily weighs on the market.

"We note that basis bids for both soybean meal and soybean
exports have dropped steadily over the past several weeks, well ahead of the
harvest, even as futures prices were grinding higher," Mr Narayanan said.

"As cash prices are the summation of basis and futures
prices, it appears that end-users have effectively capped the price they are
willing to pay."

Soybean prices "appear to have become 'toppy' at these
levels".

Corn vs wheat

For wheat, SocGen said that prices would likely follow those
of corn in the near-term, linked by their position as alternatives in feed
rations.

However, the exit of Black Sea suppliers from wheat exports
will shift business "back to the European Union and US in the second half of
the wheat June-to-May marketing year, likely towards the end of 2012 or early
2013.

"This, in turn, should decouple wheat prices from corn, and
wheat should push higher independently."

Furthermore, while "recent rains, particularly from Isaac,
helped mitigate the impact, US winter wheat plantings remain at risk from the
effects of drought", the bank said.